Wall Street slid Monday as investors braced for key inflation data and reassessed Federal Reserve policy, while crypto remained under pressure despite a string of positive regulatory developments.
Rising trade tensions and concerns over inflation are adding to the risk-off sentiment, with Bitcoin and Ethereum falling alongside equities.
The S&P 500 dropped 2.6%, the Nasdaq-100 lost 3.1%, and the Dow Jones Industrial Average declined 2.2%, as traders moved to the sidelines ahead of this week’s inflation report.
Nikkei 225 and Hang Seng futures pointed to further losses in Asia, signaling continued global market stress.
Crypto has mirrored that downturn, with Bitcoin falling 5.8% to $76,838 over the previous 24 hours and Ethereum down 11.5% to $1,795, according to CoinGecko data. Both digital assets have fallen 19% and 29% respectively over the past 30 days.
Why Are Bitcoin, Ethereum Prices Falling?
The crypto market continues to bleed as traders reassess the impact of trade tensions on global economic activity and President Donald Trump’s Bitcoin Reserve order. Bitcoin has dipped 4.8% to $81,729 while Ethereum is down 8%, hovering just above November 2023 prices near $2,000. Dogecoin leads losses among the top 10 cryptos, down about 13% to $0.16. That’s despite Trump signing an Executive Order on Thursday, officially establishing the Strategic Bitcoin Reserve and authorizing the creation o...
While signs of expanding liquidity could offer relief this year, uncertainty over capital flows and monetary policy have continued to apply pressure to risk assets.
At the same time, President Donald Trump is preparing to sign an executive order aimed at reversing anti-crypto banking policies put in place during the Biden administration, sources told Decrypt on Monday.
The order is expected to roll back initiatives tied to “Operation Chokepoint 2.0,” a controversial banking restriction that allegedly targeted crypto firms.
It may also include directives on stablecoin classification and Federal Reserve banking policies, reinforcing the White House’s pro-crypto stance following Trump’s recent push to establish a U.S. Bitcoin reserve.
Investors are now focused on Wednesday’s Consumer Price Index (CPI) report, expected to show a 0.3% rise in February prices, cooling from January’s 0.5% gain.
The year-over-year CPI is projected at 2.9%, slightly below January’s 3%, while core inflation is forecast to remain at 3.2%, according to MarketWatch data.
Any upside surprise could reinforce expectations that the Fed will delay rate cuts, weighing further on risk assets—including equities and crypto.
Bitcoin, Ethereum Drop as US Reports Inflation Rose to 3% in January
Bitcoin dropped as consumer prices rose more than expected last month, indicating the pace of inflation accelerated in January after running hotter over the previous three months. The Consumer Price Index (CPI) rose 3% in the 12 months through January, the Bureau of Labor Statistics (BLS) said Wednesday. Economists expected the index, which tracks price changes across a broad range of goods and services, to show a 2.9% annual increase. In September, annual inflation had cooled to 2.4%, per the B...
Liquidity boom?
While M2 money supply expanded in 2024 and has remained flat this year, uncertainty over the Fed’s next moves and tightening financial conditions have kept risk assets at bay.
The Fed’s balance sheet has continued to shrink, falling to $6.75 trillion, from April 2022’s near $9 trillion, as part of its ongoing quantitative tightening program.
While broader liquidity indicators like M2 suggest stabilization, the Fed’s cautious stance on inflation and fiscal restraint in the form of Elon Musk’s DOGE are keeping investors defensive.
Still, some analysts see shifting liquidity conditions that could benefit risk assets in the months ahead.
Jamie Coutts, Real Vision’s chief crypto analyst, pointed to the U.S. dollar’s sharpest decline since the global financial crisis, helping ease debt costs and inject liquidity into markets.
“Such declines have heralded much higher asset prices two to three months later, as liquidity tends to act with a lag,” he told Decrypt.
President Trump's Solana Meme Coin Down 85% From Peak as Inflation Fears Slam Bitcoin
President Donald Trump’s official Solana meme coin TRUMP is trading at $10.50, down more than 85% from its all-time high price of $73.43 set in January, according to data from CoinGecko. The token’s slide coincides with larger drawdowns for leading indices in traditional financial markets and the top crypto assets like Bitcoin and Ethereum, which are each down more than 8% over the last week. TRUMP itself is down about 4% on the day and 19% over the last week. Those selloffs come as President T...
Coutts added that while markets are focused on tariffs and fiscal tightening, many are misinterpreting the spending cuts.
“When the U.S. government reduces waste, it enables a larger role for the private sector—crucial for developing a growth and innovation-driven economy,” he said.
This could give the Fed more latitude to implement rate cuts and eventually end QT, particularly as Trump moves to stimulate the economy ahead of the U.S. midterms.
Still, markets will need to contend with continued trade tensions, with U.S. tariffs on China and Canada, slated for next month, raising concerns on a global economic slowdown and driving inflation higher.
With inflation data and the U.S. federal budget report due Wednesday, markets are likely to remain volatile.
But with Trump pushing pro-crypto policies and liquidity trends shifting, the outlook for digital assets could diverge from broader risk markets, Decrypt was told.
